If you want to make a lasting impact with your dollar, giving to a children’s charity seems like a good way to do it. Greg Thomson, director of research at Charity Intelligence Canada, which analyzes the country’s charities, points out that helping children in need can change the course of the rest of their lives. If that change helps them stay out of jail, live independently and support themselves, society as a whole benefits, too. Of course, there’s another reason why they’re so popular. “It’s easier to raise money for them,” Thomson says. “It’s more emotionally charged.”

More than one-quarter of Canada’s 86,000 charities mention children or youth in their names or descriptions, making it a worthwhile endeavour to examine how all that money is being raised and spent for the third annual Charities of the Year project. The annual report card assesses how efficiently charities are raising and spending money, and evaluates how transparent they are about their finances and the work they do.

This year, we scrutinized the 740 children’s charities that raked in total donations of more than $100,000 in 2013, the most recent year with a full set of tax return data available. The charities all focus on helping children who are in need in some way, whether it be illness, poverty or belonging to a marginalized group. In past years, only charities that were national in scope were considered. But because this year’s report card has a narrower focus, regional charities were included. In the interest of highlighting organizations that would appeal to all readers, charities with explicitly religious missions were once again excluded.

An important part of the report card is assessing whether charities accurately reported their finances to the Canada Revenue Agency. Donors rely on charity tax returns, which are publicly available online, to find out what’s happening with their money. Unfortunately, those tax returns are often riddled with errors. Interestingly, the children’s charities under consideration this year were more diligent at tax time than their large, national peers, but they still left plenty of room for improvement.

About 40% of the children’s charities analyzed made obvious mistakes on their 2013 tax returns, the most common being that they failed to report spending any money on fundraising. After all, those donations didn’t raise themselves. That’s bad, but not as bad as the million-dollar-plus national charities analyzed in last year’s report card, half of whom made glaring errors. There are also almost certainly a significant number of less obvious mistakes.

This year’s 23 winning charities filed accurate returns, and they also posted audited financial statements on their websites, allowing donors to double-check them and get more detail. They all keep overhead costs under 35% of their total annual expenses and ensure a minimum of 65 cents from every donated dollar goes to helping needy children, as opposed to being used to raise more funds. Most importantly, they all do a great job of communicating the impact those donations are having.

The letter grade assigned to each charity evaluates how well they used evidence, statistics and clear language to explain how they spent their money and how it helped children. The report uses a scoring method designed by Charity Intelligence to assign the social impact letter grades. FPM graded the charities with an asterisk, and Charity Intelligence graded the rest. Six of the charities are winners from previous years. Boys and Girls Clubs of Canada was named charity of the year in 2015, Canadian Tire Jumpstart Charities and Big Brothers Big Sisters of Canada won in 2014, and Sleeping Children Around the World, Plan International Canada and World Vision Canada have been winners three years in a row.

The winning charities vary greatly in size. Ottawa-based Ten Oaks Project, which runs camps for children and youth who are LGBT or come from LGBT families, pulled in $165,000 in revenue in 2013; World Vision, meanwhile, attracted $391 million. All of them are worth your consideration.

B Boys and Girls Clubs of Canada: Provides a safe, affordable, enriching and fun place for children to go after school.

B Canadian Tire Jumpstart Charities: Assists with the costs of children’s sports programming

B* Boost Child Abuse Prevention and Intervention: Provides services and education to combat child abuse. Boost was established in 1981 by Paul Godfrey, CEO of Postmedia Network Inc., which also owns this magazine.

B-* The Children’s Foundation of Guelph and Wellington: Provides disadvantaged local children with nutrition programs, financial assistance for recreational activities and scholarships.

* FPM graded the charities with an asterisk, and Charity Intelligence graded the rest.

Tugging on donors’ heartstrings with photos of wide-eyed, needy children is a great way to get them to open their wallets. It also makes it all the more upsetting when that money isn’t being raised and spent as effectively as it should be. Here are some issues and concerns noted in the course of poring through hundreds of charity tax returns.

DUPLICATION

Do we really need 38 children’s cancer charities? How about 18 children’s wish charities? There are many examples of children’s charities with similar mandates that might benefit from consolidation, rather than competing with each other.

A particularly instructive example is the Guelph Wish Fund for Children, which has been making between 160% and 175% more than it spends for years. In 2013, it racked up a surplus of $82,000, spending just $39,000 on granting wishes and making donations to other charities. Executive director Peter Baldasso says donations have been steadily increasing even though the charity has only identified 20 seriously ill or disabled local children to grant wishes to. “That’s our challenge as a charity and we know that. How do we find more kids?” he says. “It’s not that we don’t want to spend the money, believe me.” Baldasso says Guelph Wish plans to start distributing the extra money to local hospitals. The charity could also team up with another children’s wish charity and distribute the money to kids outside the region, but Baldasso says he isn’t particularly interested in that because donors like the local focus. “I don’t think we’ll ever team up,” he says. “We find ourselves quite successful the way we are.”

EXPENSIVE EVENTS

The next time a friend asks you to sponsor her for a run or buy a ticket to a charity gala, bear in mind that events are a spectacularly inefficient way to raise money. That gala ticket pays the bartenders, live band and souvenir T-shirt company, among many others, before any needy people see a dime.

For example, people and companies generously donate hundreds of thousands of dollars worth of supplies each year to help the Easter Seals of B.C. and the Yukon host its annual 24 Relay for the Kids, which helps send disabled children to summer camp. Excluding the value of those donated supplies, only about half the money raised by the event goes to sponsor needy children. Considering the people who donated those supplies could have donated their value directly to help the needy instead, the portion of donations eaten up by fundraising costs is more like three-quarters.

In an email, Easter Seals of B.C. and the Yukon CEO Charlene Krepiakevich says the charity is phasing out the relay after years of declining revenues. “Changes were required as participation was steadily declining, net proceeds [were] also declining, yet costs remained fixed,” she wrote.

Greg Thomson, director of research at Charity Intelligence, says people who want to attend or donate to a fundraising event should go ahead and do it, but the money they spend should come out of their entertainment budgets. “It’s really unfortunate if someone donates $100 and thinks that’s part of their donation budget and only $25 of that is actually a donation,” Thomson says. “That’s, in a sense, $75 in lost donations.”

NOT-SO-TRANSPARENT TRANSPARENCY PLEDGES

Charities often make commitments to donor transparency and accountability. However, these promises aren’t always backed up with action. Take Food for Famine, which distributes Ready-to-Use Therapeutic Food (RUTF), a fortified peanut paste, to malnourished children in developing countries. The donor promise section on its website says the charity places “a high value on transparency and accountability to all our sponsors and donors,” but it doesn’t post its financial statements on its website or provide statistics about who the charity has helped in the past year.

Food for Famine also states that 100% of donations go toward the purchase of RUTF, which is not accurate. Its overhead costs are impressively low — between 6% and 23% over the past three years, according to its tax returns — but they are not zero.

Sometimes charities make this claim if they have funding coming from another source — for example, a government grant — that covers overhead costs. It’s a dubious claim in any circumstance because money is fungible, but it’s particularly dubious in this case since Food for Famine’s tax returns state 97% of its revenue comes from tax-receipted donations. Representatives of Food for Famine did not respond to requests for comment.

OUR METHODOLOGY

We started with a data set of 2013 tax return information for Canada’s 86,000 registered charities, and narrowed that down to 740 non-religious children’s charities making more than $100,000 in donation revenue. The remaining list of charities were evaluated based on the following standards: Do donors have access to charities’ accurate, error-free tax returns (the primary means by which the public has access to their financial information)? Does the money charities take in quickly flow out again to fund good works, as opposed to accumulating in reserve funds that could fund more than three years of budgets? Do the charities spend less than 35 cents to fundraise every donated dollar? Do the charities spend more than 65% of their annual budgets on programs and giving, as opposed to administration, salaries, political lobbying and other overhead? Have the charities posted their three most recent years of full, audited financial statements that support the numbers they reported to the CRA? Have the charities published information online that demonstrates the actual charitable work that they do and the impact it makes on their cause, using plain language and quantifiable performance metrics?

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